No offense intended, but I didn't know the term wasn't used any more. I thought it referred to some characteristics in the eye folds (among other physical characteristics) in those afflicted with Down's syndrome. As a kid I remember that term, not as a slur, but as the name more common than Down's syndrome.
Was I mistaken?
No you're not. Mongoloid was originally part of the race theory of human beings, and then it became associated with down's syndrome. Those afflicted with the condition often times took on the eye characteristics of 'Mongoloids'and as such today it's not used anymore because it's seen as offensive because you're associating mental disorder with a group of people.
It may have been inoffensive once, but... it's really more in how it's used. People don't use "mongoloid" affectionately, they use it as a slur. Or as a way to objectify a person- "that mongoloid kid", something along those lines. The only people I've ever heard using the term were being offensive. It's like people who say "tard" to refer to someone who's mentally retarded.
If you used it in front of a friend or family member of someone who has Downs Syndrome, you'd either be politely educated, or slugged, depending on whether they thought you were being intentionally rude.